Jefferies says that Global steel and aluminium prices have found renewed strength post the Chinese New Year and are at 10-year and 3-year highs respectively. The decarbonisation efforts are weighing down on steel supply in China and Japan while a synchronized recovery in global manufacturing and potential infrastructure stimulus across regions bodes well for demand. Jefferies remains positive on Indian metals with Tata Steel and Hindalco as top Buys in the metal sector. Jefferies remain positive on Indian metals with Tata Steel (price target raised Rs 915) and Hindalco (price target to Rs 390) as Jefferies top Buys in Metal Sector.

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Decarbonisation efforts weighing down on steel supply:

Jefferies says that the metal and mining sector is facing rising intensity of environmental pressures. China's Tangshan city has imposed production restrictions on 23 steelmakers, which is likely to impact the country's steel production by 2% in 2021. In Japan, Nippon Steel is closing down five of its 15 blast furnaces, shutting down 10mtpa of capacity. China's rising green focus could start to weigh on the country's aluminium production as well. These supply pressures are manifesting amid improving demand led by a synchronized recovery in global manufacturing and potential infrastructure stimulus across regions.
Indian steel prices now at discount to landed imports:

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Jefferies adds that Indian HRC (flat) steel prices corrected from a peak of Rs 57.5K/t in January to Rs 53.5K/t in March but have since improved slightly to Rs54.5K/t. With the recent rally in Asian steel prices, Indian

HRC prices are now at 7-10% discount to landed imports. Indian demand is recovering well, up 13% YoY in Jan-Feb, driving net exports down from an average of 0.9mt/ month over May-Sep to just 0.1mt/month over Oct-Feb. Hence, Jefferies says that it believes Indian prices have room to rise in the near-term if Asian prices hold up. The sustainability of Asian spot steel prices at the current high levels remains a key uncertainty, but our FY22-23 estimates for Indian steel prices are 11-12% below spot and already factor in a large cushion.